A new law enabling the mutual recognition of judgments in civil and commercial cases between the mainland and Hong Kong that will take effect on 29 January 2024 is expected to reduce the costs of repeated litigation in the regions.
The new law will implement an arrangement signed between the mainland and Hong Kong in 2019. Hong Kong will enter into an extensive reciprocal enforcement of judgments with the mainland, as the new rule covers monetary and non-monetary judgments in civil and commercial cases, including the awarding of damages usually in the form of compensation.
Chris Dobby, a Hogan Lovells partner based in Hong Kong, said: “Hong Kong’s position as a premier centre for legal and dispute resolution services will be further enhanced.”
He explained that “Parties will be spared the inconvenience and costs of having to start proceedings afresh and adducing expert evidence of foreign law in Hong Kong or relitigating the matter in the mainland.”
Similar legal mechanisms were introduced in 2008, but with limited coverage. The mechanism only allowed for the mutual enforcement of monetary judgments, and both parties in the case had to provide a written agreement that either the mainland court or the Hong Kong court would have exclusive jurisdiction. The new rule will eliminate these requirements.
In addressing the previous ambiguity about the inclusion of punitive damages, such as liquidated damages, in the mutual recognition, the new regulation specifies that this aspect will not be acknowledged or enforced, except in cases involving intellectual property infringement and anti-unfair competition.
Dobby said, “Certain judgments are excluded altogether from the new regime, for example arbitration-related judgments. Whilst judgments given in proceedings for the recognition and enforcement of an arbitral award are included, this only applies to judgments where the place of arbitration was either Hong Kong or the mainland.”
While the new rules do not involve insolvency and bankruptcy judgments, some IP cases involving patents are also excluded.
Determining which judgments can be enforced in Hong Kong has been a matter of controversy. In the case of Chiyu Banking Corp Ltd v Chan Tin Kwun (1996), the judge ruled that a judgment seeking recognition and enforcement in Hong Kong must be final and conclusive.
Dobby said that proving that the judgment is final and conclusive is challenging because the case can be retried in the mainland. Therefore, “the ordinance now uses the concept of whether a judgment is legally ‘effective’ rather than whether it is ‘final and conclusive’”, he said.
Frederick Hui, a Hong Kong-based partner and member of the administrative committee at Zhong Lun Law Firm, said: “These provisions aim to guarantee the convenient and seamless enforcement of mainland judgments, while also reducing the uncertainties stemming from the variances in the legal systems between the two regions.”
Given that the recognition of judgments is not automatically applicable, one of the parties in a case is required to apply for court approval for the registration of a judgment. After securing a registration order, the applicant must inform the opposing party within a specific timeframe. Otherwise, the registration will be invalidated.
Hui said, in Hong Kong, the applicant would be obligated to send the registration order via the mainland court mechanism to the other party, if they only have a mainland address.
“Such a delivery arrangement is time-consuming,” he added, and “if the delivery cannot be carried out in the mainland, it will present a significant obstacle for the applicant to enforce a mainland judgment in Hong Kong.”
He believed the new ordinance would fulfil the original purpose of reducing parallel proceedings between the mainland and Hong Kong.
“However, the occurrence of parallel proceedings has close ties to the litigation strategy adopted by the parties in each case and may not be necessarily based on cross-border enforcement considerations,” said Hui. He anticipated the impact on parallel litigation would be limited.
